Suffering from a Low Credit Score?

Are you one of those people who can’t seem to track where their credit score is headed? If that really is the case then you may just be heading towards paving the way towards a financial disaster. In my four-and-a-half years of working as a financial expert, I cannot count the times I have stressed the importance of a good credit score to my clients.

The simple fact is that we are all hard-working individuals, and in this staggering economy, making a living isn’t easy as it is. Then why would you want to pay more for those services that you can obtain by paying less?

This is exactly what a low credit score does. It forces you to pay more for the same services that others are paying less for. The reason: a low credit score will cost you more. When I say that it will cost you more, I am talking about real monetary terms, not just a bad reputation.

How Will a Low Credit Score Cost You?

This is a common question that people ask me when I tell them that their low credit score is costing them in monetary terms. The answer to this is often obvious, but most of us are not able to see it. First, you need to know that FICO is the agency that assigns these credit ratings. These credit ratings fall in the range of 300 and 850. A low credit score simply means that your debt is badly managed, you are missing credit payment and your debt is mounting up. It also means that you are a credit risk.

Now that we have covered the basics about credit scores, let’s discuss how a bad credit score will end up costing you more. Here are seven ways in which a low credit score can cost you big-time.

1.  Home Loans

Your credit score determines the interest rates charged on a home mortgage. If your credit score is bad, then you will most likely be charged a higher interest rate. Since home loans are long-term, you will be paying a higher interest over the entire period. You will end up paying thousands of dollars more for a house that is not worth it.

2.  Car Loans

Borrowers with great credit scores are the ones that qualify for the best interest rates on car loans. The ones that hold a bad score end up paying thousands of dollars more in interest.

3.  Credit Cards

A low credit score could even mean that your credit card applications will be denied. Even if your credit card application is approved, you will be paying an interest rate easily twice that of good credit score holders. Some credit card companies may ask you to keep a security deposit equal to your credit line to avail of their services.

4.  Insurance

Credit scores matter to insurance companies as well. They need to safeguard their risk against the fact that you will make future payments. If you are at a higher risk, then your insurance premium will be higher than that of low-risk clients.

5.  Employment

Believe it or not, employers also check your credit ratings before they offer you a job. I have heard of numerous instances myself when someone lost a great job opportunity because of a bad credit report.

6.  Utilities

Utility and cell phone providers will keep a check on your credit score. Individuals with low credit scores are asked to establish a security deposit. That means you will have hundreds of dollars trapped in security deposits.

7.  Tenant Applications

If you are living on rented premises, then you must know that a credit score is important to the landlord. It tells them if you will be able to pay them the rent on time. If your credit score is bad, your tenant application may be rejected unless you keep a hefty security deposit.

Revelations Indeed!

Some of these things were even revelations for me when I learned about them for the first time. Who knew that a low credit score would affect your employment or residential status? However, a low credit score affects many things in our life and it should be maintained constantly. We really work hard for our wages, then why let them go to waste in higher interest because of a lower credit score?